Springleaf Swings to Profit After Big Asset Sale
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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowEvansville-based Springleaf Holdings Inc. (NYSE: LEAF) is reporting full-year net income of $504.6 million, compared to a loss of $19.3 million in 2013. The lending company says annual results were boosted by a gain on the sale last year of $8 billion in real estate assets. Springleaf recently announced the acquisition of Maryland-based OneMain Financial for $4.25 billion. That deal is set to close in the third quarter.
The company says it will transition its headquarters to Connecticut and change its name to OneMain next year.
March 13, 2015
News Release
EVANSVILLE, Ind. (March 12, 2015) – Springleaf Holdings, Inc. (NYSE:LEAF), today reported a GAAP basis net loss of $47 million, or $0.41 per diluted share for the fourth quarter of 2014, compared with net income of $27 million or $0.24 per diluted share in the fourth quarter of 2013. Net income for the full year 2014 was $505 million, or $4.38 per diluted share, largely attributable to the previously announced pretax gain of $726 million on the sale of approximately $8 billion of real estate assets.
For Core Consumer Operations, core earnings (a non-GAAP measure) for the quarter was $65 million, versus $48 million in the prior year quarter, and earnings per diluted share (a non-GAAP measure) was $0.57 for the fourth quarter versus $0.43 in the prior year quarter3,4. For the segment, full year core earnings were $238 million, versus $198 million in the prior year, and earnings per diluted share was $2.07 versus $1.92 in the prior year.
Fourth Quarter Highlights
Consumer net finance receivables reached $3.8 billion at December 31, 2014, an increase of $666 million, or 21% from December 31, 2013, and 6% from September 30, 2014.
Consumer net finance receivables per branch were $4.6 million at December 31, 2014, up 22% from December 31, 2013 and 6% from September 30, 2014.
Risk-adjusted yield for our Consumer segment in the quarter was 21.99%, up 81 basis points from the fourth quarter 2013.
The company generated over $1.0 billion of total consumer origination volume in the fourth quarter including $160 million of direct auto loan originations. Direct auto loan receivables reached $238 million at year-end.
Jay Levine, President and CEO of Springleaf said, “Just last week we were very excited to have reached an agreement to acquire OneMain Financial, a leading national provider of personal loans, and we look forward to closing on the acquisition and building on the enormous potential of the combined company.”
Commenting on the company’s fourth quarter results, Levine added, “We remain focused on supporting our customer needs and growing our branch loan receivables while maintaining appropriate pricing and effective credit risk management. Once again this quarter we have grown branch receivables north of 20% year over year, and consumer receivables per branch reached $4.6 million.”
Core Consumer Operations: (Reported on a historical accounting basis, which is a non-GAAP measure. Refer to the reconciliation of non-GAAP to comparable GAAP measures below.)
Consumer and Insurance
Consumer and Insurance pretax income was $64 million in the quarter versus $41 million in the fourth quarter of 2013, and flat from the third quarter of 20145.
Consumer net finance receivables reached $3.8 billion at December 31, 2014, an increase of 21% from December 31, 2013 and 6% from September 30, 2014, driven by the company’s focus on increasing personal loan originations through its branch network and diversifying its product offerings. Consumer net finance receivables per branch continued to grow, reaching $4.6 million at December 31, 2014, up from $3.8 million at December 31, 2013 and $4.3 million at September 30, 2014.
Net interest income was $208 million in the quarter, up 27% from the prior year quarter and 6% from the prior quarter. Yield in the current quarter was 26.95%. Risk adjusted yield, representing yield less net charge-off rate, was 21.99% in the quarter, up 81 basis points from the fourth quarter of 2013 as gross yield expanded while net charge-offs remained flat year-over-year. Risk adjusted yield declined 35 basis points from the third quarter of 2014 due primarily to the seasonal increase in charge-offs.
The annualized net charge-off ratio was 4.96% in the quarter, versus 5.16% in the prior year quarter and 4.68% in the prior quarter.
The annualized gross charge-off ratio was 5.78% in the quarter, up 29 basis points from the prior year quarter and up 32 basis points from the third quarter 2014. Recoveries continued to normalize in the quarter at 82 basis points versus 33 basis points in the fourth quarter of 2013, following the sale of a pool of previously charged-off accounts in June 2013.
The 60+ delinquency ratio was 2.82% at quarter end, versus 2.60% at prior year quarter end and 2.55% at prior quarter end.
Acquisitions and Servicing
The Acquisitions and Servicing segment contributed $39 million to the company’s consolidated pretax income in the quarter6. The entire Acquisitions and Servicing segment, which includes non-controlling interests, generated pretax income of $51 million in the quarter7, with net interest income of $112 million and yield of 26.47%. Actual net finance receivables at quarter-end were $2.0 billion, down from $2.1 billion at September 30, 2014. The principal balance of the portfolio was $2.6 billion at quarter-end versus $3.2 billion at December 31, 2013.
The annualized net charge-off ratio was 5.56% in the quarter, versus 8.46% in the prior year quarter and 5.31% in the prior quarter.
The annualized gross charge-off ratio was 6.15% in the quarter, down 284 basis points from the prior year quarter and up 32 basis points from the third quarter 2014. Recoveries continued to improve in the quarter at 59 basis points versus 53 basis points in the fourth quarter of 2013.
The delinquency ratio for the Acquisitions and Servicing segment was 4.69% at the end of the quarter, a decrease of 42 basis points from the prior quarter end.
Non-Core Portfolio: (Reported on a historical accounting basis, which is a non-GAAP measure.)
Legacy Real Estate and Other Non-Core
The Non-Core Portfolio (consisting of legacy real estate loans) and Other Non-Core activities generated a pretax loss of $71 million in the quarter8. The legacy real estate portfolio pretax loss primarily results from the impact of full year real estate sales on the segment’s interest earning assets. The proceeds from these sales have been allocated to the Non-Core portfolio, which resulted in a reduction to net interest margin.
Liquidity and Capital Resources
As of December 31, 2014, the company had $3.4 billion of cash and highly liquid investment securities. The company had total outstanding debt of $8.4 billion at quarter-end, in a variety of debt instruments.
Source: Springleaf Holdings Inc.